Chapter: strategy implementations

Submitted to in respect of sir Aftab khan

submitted by sadam Hussain MBA 5th term roll no 27

The Nature Of Strategy Implementation

The implementation of organization strategy involves the application of the management
process to obtain the desired results. Particularly, strategy implementation includes
designing the organization's structure, allocating resources, developing information and
decision process, and managing human resources, including such areas as the reward
system, approaches to leadership, and staffing.
Each of these management functions has been the subject of extensive writing and research
by scholars and practitioners and has covered in management books.
Since full coverage of each management function is beyond the scope of this thesis, I shall
focus only on the factors that are most critical to effective implementation strategy.
Concept Of Strategy Implementation
Strategy implementation is "the process of allocating resources to support the
chosen strategies". This process includes the various management activities that are
necessary to put strategy in motion, institute strategic controls that monitor progress, and
ultimately achieve organizational goals.
For example, according to Steiner, "the implementation process covers the entire
managerial activities including such matters as motivation, compensation,
management appraisal, and control processes".
As Higgins has pointed out, "almost all the management functions -planning,
controlling, organizing, motivating, leading, directing, integrating, communicating,
and innovation -are in some degree applied in the implementation process".
Pierce and Robinson say that "to effectively direct and control the use of the firm's
resources, mechanisms such as organizational structure, information systems,
leadership styles, assignment of key managers, budgeting, rewards, and control
systems are essential strategy implementation ingredients".
The implementation activities are in fact related closely to one another, and decisions about
each are usually made simultaneously. I have split these activities in the next chapters.
Analyzing Strategies Changes
Most organizations do not start out completely diversified. Therefore, in implementing a
diversification strategy organizations face two important questions:
1. How will the organizations more from a single product strategy to some form of
diversification?
2. How will it manage diversification effectively?

The concept of center of gravity opens a broader range of strategic options to the firm.
These include vertical integration; by-product, related, intermediate, and unrelated
diversification and finally, a shift in center of gravity.
Vertical Integration
The first strategic change that an organization sometimes makes is to vertically integrate
within its industry. The organization can move backward to prior stages to guarantee
sources of supply and secure bargaining leverage on vendors; or it can move forward to
guarantee markets and volume for capital investments, and became its own customer to
feed back data for new products. Each company can have its center of gravity at a different
stage.
However, this initial strategic move does not change the center of gravity, because the prior
and subsequent stages are usually operated for the benefit of the center of gravity stage.
Research findings indicate that the poorest performer of the strategic categories is the
vertically integrated by-product seller (Rumelt 1974). These companies are all upstream,
row material, and primary manufacturers. Their resource allocation was within a single
business, not across multiple products. Significant here is their inability to change, because
the management skills-partly technological know-how does not transfer across industries at
the primary manufacturing center of gravity.
Diversification
The next strategic change that a company usually takes is diversification. There are different
types of diversification.
By-Product Diversification. One of the first diversification moves that are vertically
integrated company makes is to sell by-products from points along the industry chain. But
the company has changed neither its industry nor its center of gravity. A key dimension that
distinguishes among companies pursuing this strategy is the number of industries into which
by-products are sold.
Related Diversification. Related Diversification is a strategic change in which the company
moves its core industry into other industries that are related to the core industry. The
position taken here is that relatedness has two dimensions: 1. one is the degree to which
the new industry is related to the core industry; 2. the other - more important - is the
degree to which the company operates at the same center of gravity in the new industry.
Related diversification is a strategic change in which the company diversifies be entering
new industry but always enters business in that industry at the same center of gravity. An
appreciation for the degree of relatedness is needed to estimate the amount of strategic
change that is being attempted. A scale of relatedness could be constructed by listing the
functional aspects of any business, such as process technology, product technology, product
development, purchasing, assembly, packing, shipping, inventory management, quality,
labor relations, distribution, selling, promotion, advertising, consumer / customer, buying
habits, working capital, and credit.

The magnitude of strategy implementation problem is directly proportional to the amount of

relatedness in the diversification move. The less related the diversification, the greater the
difficulty of strategy implementation, and the greater the likelihood of acquisition versus
internal growth.
Intermediate diversification. Between related and unrelated diversifiers are a large
number of firms whose businesses are somewhat related but operate at a number of centers
of gravity. The strategic change hypothesized is to be more difficult because it involves
managing businesses with different centers of gravity. The company must learn not only
new businesses but also new ways of doing business.
Unrelated Diversification. The unrelated company has several centers of gravity, operate
in many industries, and actually seek to avoid relatedness (e.g., electronic, energy).
However, the intermediate and unrelated diversification does not change the centers of
gravity of their
Changes In Center Of Gravity
Changes in the center of gravity usually occur by a new star-up at a new center of gravity
rather than by a shift in the center of established firms. Changing of gravity is difficult
because it requires a dismantling of the current power structure, rejection of parts of the old
culture, and establishing all new management systems.
The companies that are successful are those that began as downstream companies and
established their center of gravity there.
Strategy And Structure
Each strategy has an associated organizational structure consistent with the above view of
strategy and diversification. These relationships are summarized in the tale below.
Strategy

Structure

Single business

Functional

Vertical by Products

Functional with profit centers

Related businesses

Divisional

Intermediate businesses

Mixed structures

Unrelated Businesses

Holding company

Managing Diversification
An organizations implements diversification must monitor and manage its strategy. The two
major tools for managing diversification areorganization structure and portfolio management
techniques. How organziatio0ns structure can be used to manage a diversification strategy I
discuss in detail in Chapter 3.

In Volume 2 I shall show portfolio management techniques that diversified organizations use
to make decisions about those businesses to engage in and how to manage these multiple
businesses in order to maximize corporate performance.
Analyzing Organizational Structure
Functional Structure
The organization is structured according to functional areas instead of product lines. The
functional
structure groups specialize in similar skills in separate units. This structure is best used
when creating
specific, uniform products. A functional structure is well suited to organizations which have
a single or
dominant core product because each subunit becomes extremely adept at performing its
particular portion
of the process. They are economically efficient, but lack flexibility. Communication between
functional
areas can be difficult.
The most widely used structure is the functional or centralized type because this structure
is the simplest
and least expensive of the seven alternatives. A functional structure groups tasks and
activities by business
function such as production/operations, marketing, finance/accounting, research and
development, and
computer information systems. A university may structure its activities by major functions
that include
academic affairs, student services, alumni relations, athletics, maintenance, and
accounting. Besides being
simple and inexpensive, a functional structure also promotes specialization of labor,
encourages efficiency,
minimizes the need for an elaborate control system, and allows rapid decision making.
Some disadvantages
of a functional structure are that it forces accountability to the top, minimizes career
development
opportunities, and is sometimes characterized by low employee morale, line/staff conflicts,
poor
delegation of authority, and inadequate planning for products and markets.
Divisional Structure
Divisional structure is formed when an organization is split up into a number of selfcontained business
units, each of which operates as a profit centre. such a division may occur on the basis of
product or
market or a combination of the two with each unit tending to operate along functional or
product lines,
but with certain key function (e.g. finance, personnel, corporate planning) provided
centrally, usually at
company headquarters.
The divisional or decentralized structure is the second most common type used by
American businesses.
As a small organization grows, it has more difficulty managing different products and
services in different
markets. Some form of divisional structure generally becomes necessary to motivate

employees, control
operations, and compete successfully in diverse locations. The divisional structure can be
organized in one
of four ways: by geographic area, by product or service, by customer, or by process. With a
divisional
structure, functional activities are performed both centrally and in each separate division.
A divisional structure has some clear advantages. First and perhaps foremost,
accountability is clear. That
is, divisional managers can be held responsible for sales and profit levels. Because a
divisional structure is
based on extensive delegation of authority, managers and employees can easily see the
results of their good
or bad performances. As a result, employee morale is generally higher in a divisional
structure than it is in
a centralized structure. Other advantages of the divisional design are that it creates career
development
opportunities for managers, allows local control of local situations, leads to a competitive
climate within an
organization, and allows new businesses and products to be added easily.
The divisional design is not without some limitations, however. Perhaps the most important
limitation is
that a divisional structure is costly, for a number of reasons. First, each division requires
functional
specialists who must be paid. Second, there exists some duplication of staff services,
facilities, and
personnel; for instance, functional specialists are also needed centrally (at headquarters) to
coordinate
divisional activities. Third, managers must be well qualified because the divisional design
forces delegation
of authority; better-qualified individuals require higher salaries. A divisional structure can
also be costly
because it requires an elaborate, headquarters-driven control system. Finally, certain
regions, products, or
customers may sometimes receive special treatment, and it may be difficult to maintain
consistent,
companywide practices. Nonetheless, for most large organizations and many small firms,
the advantages
of a divisional structure more than offset the potential limitations. A divisional structure
by geographic area is appropriate for organizations whose strategies need to be
tailored to fit the particular needs and characteristics of customers in different geographic
areas. This type
of structure can be most appropriate for organizations that have similar branch facilities
located in widely
dispersed areas. A divisional structure by geographic area allows local participation in
decision making and
improved coordination within a region.
The divisional structure by product is most effective for implementing strategies when
specific products
or services need special emphasis. Also, this type of structure is widely used when an
organization offers
only a few products or services, or when an organization's products or services differ
substantially. The

divisional structure allows strict control and attention to product lines, but it may also
require a more
skilled management force and reduced top management control.
When a few major customers are of paramount importance and many different services are
provided to
these customers, then a divisional structure by customer can be the most effective way
to implement
strategies. This structure allows an organization to cater effectively to the requirements of
clearly defined
customer groups. For example, book publishing companies often organize their activities
around customer
groups such as colleges, secondary schools, and private commercial schools. Some airline
companies have
two major customer divisions: passengers and freight or cargo services. Merrill Lynch is
organized into
separate divisions that cater to different groups of customers, including wealthy
individuals, institutional
investors, and small corporations.
A divisional structure by process is similar to a functional structure, because activities
are organized
according to the way work is actually performed. However, a key difference between these
two designs is
that functional departments are not accountable for profits or revenues, whereas divisional
process
departments are evaluated on these criteria. An example of a divisional structure by
process is a
manufacturing business organized into six divisions: electrical work, glass cutting, welding,
grinding,
painting, and foundry work. In this case, all operations related to these specific processes
would be
grouped under the separate divisions. Each process (division) would be responsible for
generating
revenues and profits. The divisional structure by process can be particularly effective in
achieving
objectives when distinct production processes represent the thrust of competitiveness in an
industry.
The Strategic Business Unit (SBU) Structure
Strategic Business Unit or SBU is understood as a business unit within the overall
corporate identity which
is distinguishable from other business because it serves a defined external market where
management can
conduct strategic planning in relation to products and markets. When companies become
really large, they
are best thought of as being composed of a number of businesses (or SBUs).
These organizational entities are large enough and homogeneous enough to exercise
control over most
strategic factors affecting their performance. They are managed as self contained planning
units for which
discrete business strategies can be developed. A Strategic Business Unit can encompass an
entire company,
or can simply be a smaller part of a company set up to perform a specific task. The SBU has
its own

business strategy, objectives and competitors and these will often be different from those of
the parent
company.
As the number, size, and diversity of divisions in an organization increase, controlling and
evaluating
divisional operations become increasingly difficult for strategists. Increases in sales often
are not
accompanied by similar increases in profitability. The span of control becomes too large at
top levels of
the firm. For example, in a large conglomerate organization composed of 90 divisions, the
chief executive
officer could have difficulty even remembering the first names of divisional presidents. In
multidivisional
organizations an SBU structure can greatly facilitate strategy-implementation efforts.
The SBU structure groups similar divisions into strategic business units and delegates
authority and
responsibility for each unit to a senior executive who reports directly to the chief executive
officer. This
change in structure can facilitate strategy implementation by improving coordination
between similar
divisions and channeling accountability to distinct business units. In the ninety-division
conglomerate just
mentioned, the ninety divisions could perhaps be regrouped into ten SBUs according to
certain common
characteristics such as competing in the same industry, being located in the same area, or
having the same
customers.
Two disadvantages of an SBU structure are that it requires an additional layer of
management, which
increases salary expenses, and the role of the group vice president is often ambiguous.
The Matrix Structure
A matrix structure is the most complex of all designs because it depends upon both vertical
and horizontal
flows of authority and communication (hence, the term matrix). In contrast, functional and
divisional
structures depend primarily on vertical flows of authority and communication. A matrix
structure can
result in higher overhead because it creates more management positions. Other
characteristics of a matrix
structure that contribute to overall complexity include dual lines of budget authority (a
violation of the
unity-of-command principle), dual sources of reward and punishment, shared authority,
dual reporting
channels, and a need for an extensive and effective communication system.
ANALIZING ORGANIZATIONAL CULTURE: Organisational culture is the set of important
assumptions and beliefs (often unstated) that members of an organisation share in
common.[1] It encompasses how the business operates, how employees conduct
themselves, as well as the values and beliefs that give a business its very own distinct
personality and identity.

An organisation's culture is very important in ensuring that the performance of the business
meets or exceeds the expectations of management, shareholders, and the wider
community. Organisational culture should align with the vision, values and goals outlined in
the mission statement. In order for your business to achieve its goals and objectives,
everyone that is part of the organisation must share the values and norms of the business
and align the business' goals with their own. By creating an environment that demonstrates
how the business operates, what the business sets out to achieve, and how to go about
achieving it, employees will adopt these norms and work towards the achievement

of
objectives. Managers of the business are essential in
demonstrating, instilling and reinforcing these values in the day to day operations of the
business. The manner in which a manager conducts themselves and encourages others how
to conduct themselves inextricably moulds an organisational culture. Therefore, managers
should keep this in mind, through leading by example, encouraging and promoting positive
conduct and performance as well as discouraging behaviour and conduct that goes against
the organisational culture.
The culture should also include an acceptance of change and openness to new ideas and
concepts. In order for new strategies to be effectively implemented, it must firstly be
accepted and adopted by employees. Managers should evoke the vision of the strategies,
communicate how it is to be achieved, as well as motivate and encourage employees to take
new strategies on board.
DEVELOPING an effective reward structure: Strategic reward ensures that
reward practices support the delivery of the behaviour and performance needed by the
organisation to achieve its strategic goals. While many organisations have made progress in
adopting a more strategic approach to their human resources, it has not yet filtered through
to the area of reward management. Keith Roxburgh and Dave Sorour share some of the key
steps to follow in the development of an effective reward strategy. The fact that the world
of work, globally, has changed dramatically in the last ten to fifteen years is well understood
and documented. In the face of ever increasing global competition, organisations have had
to seek new ways of leveraging value out of their human resources, driving individuals and
teams to constantly higher levels of productivity and performance, and the achievement of
strategically critical goals and outcomes.
These demands have resulted in new leadership approaches, organisational structures and
people alignment processes within organisations. Increasing recognition is given to the need
for an integrated approach to human capital management and for the strategic alignment
between HR interventions and business goals. It is our contention, however, that while many
organisations have made progress in adopting a more strategic approach to their human
resources, this has not filtered through to the area of reward management.

The definition of the word strategic has been left to individual interpretation. While it is
generally assumed that we all share the same understanding of the word, there are, in fact,
the same number of interpretations as the number of people discussing the subject.
Unfortunately, we often find organisations claiming to have strategic HR and strategic
reward plans in place, yet these are no more than a reward procedure that handles add on
elements considered strategic, such as whether to pay for hot skills, or a collection of best
practices.
There should be a logical link between the companys strategic plan, its rolled down
imperatives, and the HR or reward strategy that we create. The following diagram illustrates
the relationship:

Strategic reward ensures that reward practices support the delivery of the behaviours and
performance needed by the organisation to achieve its strategic goals. It is about leveraging
the reward system to support and drive the current and future human resource capabilities
needed by the business in terms of its business strategy, and to support ongoing
organisational change deemed critical for business success.
Strategic reward management, as a discipline, requires a systematic approach to the
deciphering of business strategy, and the internal and external factors that impact the
reward environment, leading to the development of a policy framework and the systems and
processes needed to support this, that achieve a holistic and integrated reward solution for
the business. The spectrum of what can be supported through rewarding the human element
of the equation is shown in the above diagram. A reward strategy that is aligned with the
business strategy:

influences and drives the achievement of individual and team outputs in terms of
overall business objectives

supports the attraction and retention of skills, particularly core skills

promotes the development and application of behaviours and competencies deemed

critical to organisational success, now and in the future

supports a strategically aligned talent management and succession planning process

helps to communicate organisational values and performance requirements

supports culture change and management

supports organisational development and new organisational structures and

processes

promotes teamwork and team development

provides flexibility in reward management practices and allows the organisation to

respond quickly to changing needs and circumstances in the market

meets the organisations objectives in terms of internal and external pay equity and
provides a cost-effective payroll that adds value to the business, while being linked
directly to its profitability.

At the moment, we all pay lip service to our human resources as this is what gives us the
competitive edge. However, it is astounding that the best we see in terms of a strategy is
the adoption of the best practices of our competitors, which surely do not differentiate us or
make us more competitive in the market.
The key steps in the development of an effective reward strategy are as follows:

Assessment/clarification of business strategy and the human resource implications of

this.

Audit of current organisational practices, gaps and challenges that may be met by
an effective reward strategy.

Assessment of internal and external factors that impact reward.

Linking organizational strategy to HR/reward strategy.

Developing/defining reward philosophy, policy and strategy.

Ensuring reward strategy supports organizational values, culture and change

initiatives.

Identification of the full range of financial and non-financial rewards that are needed
to support strategic talent management.

Identification of which remuneration practices best suit the item to be rewarded

(match terms and impact horizons, and consider retention aspects).

Review of base pay practices and consideration of the need for differentiation of pay
scales, and stronger alignment between base pay management and
performance/competence of employees.

Review, development and introduction of effective short-term and long-term variable

pay incentives as appropriate at different levels of the organization.

Identification of organizational values and competencies needed to support the

achievement of organizational objectives and ensuring these are supported through
the strategic reward policy.

Strengthening of performance management processes and ensuring a close

alignment between corporate goal setting and the setting of objectives at an
individual/team level.

Sufficient attention given to change management and development of competency in

reward management amongst HR personnel and key line managers.

The need to maximise the payroll investment of the organisation, drive the application of
values, performance and competencies of employees in line with business needs, and
support the strategic talent management needs of the business has never been greater.
However, the relative lack of reward management practices in many organisations is
astonishing, and should be a key area of focus and development within the human capital
management arena.
Selecting An Implementation Approach: On the basis of their research on
management practices at a number of companies, David Brodwin and L. J.
Bourgeois III have identified five distinct basic approaches to strategy implementation and
strategic change.
1. The Commander Approach
The strategic leader concentrates on formulating the strategy, applying rigorous logic and
analysis. The leader either develops the strategy himself or supervises a team of planners
charged with determining the optimal course of action for the organization. He typically
employs such tools as experience curves, growth/share matrices and industry and
competitive analysis.
This approach addresses the traditional strategic management question of "How can I, as
a general manager, develop a strategy for my business which will guide day-today
decisions in support of my longer-term objectives?" Once the"best" strategy is
determined, the leader passes it along to subordinates who are instructed to executive the
strategy.
The leader does not take an active role in implementing the strategy. The strategic leader is
primarily a thinker/planner rather than a doer. The Commander Approach helps the
executive make difficult day-to-day decision from a strategic perspective.
However, three conditions must exist for the approach to succeed:

The leader must wield enough power to command implementation; or, the strategy
must pose little threat to the current management, otherwise implementation will be
resisted.

Accurate and timely information must be available and the environment must be
reasonably stable to allow it to be assimilated.

The strategist (if he is not the leader) should be insulated from personal biases and
political influences that might affect the content of the plan.

A drawback of this approach is that it can reduce employee motivation. If the leader creates
the belief that the only acceptable strategies are those developed at the top, he may find
himself an extremely unmotivated, un-innovative group of employees.
However, several factors account for the Commander popularity. First, it offers a valuable
perspective to the chief executive. Second, by dividing the strategic management task into
two stages -"thinking" and "doing" -the leader reduces the number of factors that have to
be considered simultaneously. Third, young managers in particular seem to prefer this
approach because it allows them to focus on the quantitative, objective elements of a
situation, rather than with more subjective and behavioral considerations.
Finally, such an approach may make some managers feel as an all-powerful hero, shaping
the destiny of thousands with his decisions.
2. The Organizational Change Approach This approach starts where the Commander
Approach ends: with implementation. The organizational Change Approach addresses the
question "I Have a strategy -now how do I get my organization to implement it?"
The strategic leader again decides major changes of strategy and the considers the
appropriate changes in structure, personnel, and information and reward systems if the
strategy is to be implemented effectively.
The most obvious tool for strategy implementation is to reorganize or to shift personnel in
order to lead the firm in the desired direction. The role of the strategic leader is that of an
architect, designing administrative systems for effective strategy implementation.
The Change Approach is often more effective than the Commander Approach and can be
used to implement more difficult strategies because of used the several behavioral science
techniques. This techniques for introducing change in an organization include such
fundamentals as: using demonstrations rather than words to communicate the desired new
activities; focusing early efforts on the needs that are already recognized as important by
most of the organization; and having solutions presented by persons who have high
credibility in the organization.
However, the Change Approach doesn't help managers stay abreast of rapid changes in the
environment. It can backfire in uncertain or rapidly changing conditions. Finally, this
approach calls for imposing the strategy in "topdown" fashion, it is subject to the same
motivational problems as the Commander Approach.
3. The Collaborative Approach
This approach extends strategic decision-making to the organization's top management
team in answer to the question "How can I get my top management team to help
develop and commit to a good set of golas and strategies?"

The strategic leader and his senior manager (divisional heads, business unit general
managers or senior functional managers) meet for lengthy discussion with a view to
formulating proposed strategic changes.
In this approach, the leader employs group dynamics and "brainstorming" techniques to get
managers with differing points of view to contribute to the strategic planning process.
The Collaborative Approach overcomes two key limitations inherent in the previous two. By
capturing information contributed by managers closer to operations, and by offering a forum
for the expression of managers closer to operations, and by offering a forum for the
expression of many viewpoints, it can increase the quality and timeliness of the information
incorporated in the strategy. And to the degree than participation enhances commitment to
the strategy, it improves the chances of efficient implementation.
However, the Collaborative Approach may gain more commitment that the foregoing
approaches, it may also result in a poorer strategy.
The negotiated aspect of the process brings with several risks -that the strategy will be
more conservative and less visionary than one developed by a single person or staff team.
And the negotiation process can take so much time that an organization misses
opportunities and fails to react enough to changing environments.
A more fundamental criticism of the Collaborative Approach is that it is not really collective
decisions making from an organizational viewpoint because upper-level managers often
retain centralized control. In effect, this approach preserves the artificial distinction between
thinkers and doers and fails to draw on the full human potential throughout the
organization.
4. The Cultural Approach
This approach extends the Collaborative Approach to lower levels in the organization as an
answer to the strategic management question "How can I get my whole organization
commited to our golas and strategies?"
The strategic leader concentrates on establishing and communicating a clear mission and
purpose for the organization and the allowing employees to design their own work activities
with this mission. He plays the role of coach in giving general direction, but encourages
individual decision-making to determine the operating details of executive the plan.
The implementation tools used in building a strong corporate culture range from such simple
notions as publishing a company creed and singing a company song to much complex
techniques.
These techniques involve implementing strategy by employing the concept of "third-order
control." First-order control is direct supervision; second - order control involves using rules,
procedures, and organizational structure to guide behavior. Third - order control is more
subtle - and potentially more powerful. It consists of influencing behavior through shaping
the norms, values, symbols, and beliefs that managers and employees use in making dayto-day decisions.

This approach begins to break down the barriers between "thinkers" and "doers."
The Cultural Approach has a number of advantages which establish an organization-wide
unity of purpose. It appears that the cultural approach works best where the organization
has sufficient resources to absorb the cost of building and maintaining the value system.
However, this approach also has several limitations. First, it only works with informed and
intelligent people. Second, it consumes enormous amounts of time to install. Third, it can
foster such a strong sense of organizational identity among employees that it becomes a
handicap; for example, bringing outsider in a top management levels can be difficult
because they aren't accepted by other executives.
The strongest criticism of this approach is that it has such an overwhelming doctrinal air
about it, and foster homogeneity and inbreeding.
5. The Crescive Approach
This approach addresses the question "How can I encourage my managers to develop,
champion, and implement sound strategies?" (Crescive means "increasing" or
"growing"). The strategic leader is not interested in strategizing alone, or even in leading
others through a protracted planning process. He encourage subordinates to develop,
champion, and implement sound strategies on their own.
The crescive approach differs from the others in several ways. First, instead of strategy
being delivered downward by top management or a planning department, it moves upward
from the "doers" (salespeople, engineers, production workers) and lower middle-level
managers. Second, "strategy" becomes the sum of all the individual proposals that surface
throughout the year. Third, the top management team shapes the employees' premises
-that is, their notions of what would constitute supportable strategic projects. Fourth, the
chief executive functions more as a judge, evaluating the proposals that reach his desk,
than as a master strategist.
Brodwin and Bourgeois suggest use of the Crescive Approach primarily for managers of
large, complex, diversified organizations. In these organizations the strategic leader cannot
know and understand all the strategic and operating situations, facing each division.
If strategies are to be formulated and implemented effectively, the leader must give up
some control to spur opportunism and achievement. Therefore, the Crescive Approach for
strategic management suggests some generalizations concerning how the chief executive of
the large divisionalized firm should help the organization generate and implement sound
strategies.
The recommendation consists of the following four elements:

Maintain the openness of the organization to new and discrepant information.

Articulate a general strategy to guide the firm's growth.

Manipulate systems and structures to encourage bottom-up strategy formulation.

Use the "the logical incrementalist" manner described by James Brian Quinn, to
select from among the strategies which emerge.

The Crescive approach has several advantages. For example, it encourage middle-level
managers to formulate effective strategies and gives them opportunity carry out the
implementation of their own plans.
Moreover, strategies developed, as these are, by employees and managers closer to the
strategic opportunity are likely to be operationally sound and readily implemented. However,
this approach requires that funds be available for individuals to develop good ideas
unencumbered by bureaucratic approval cycles and that tolerance be extended in the
inevitable cases where failure occurs despite a worthy effort having been made.
One of the most important and potentially elusive of these methods is the process of
shaping managers' decision-making premises. The strategic leader can emphasize a
particular theme or strategic thrust to direct strategic thinking.
Second, the planning methodology endorsed by the leader can be communicated to affect
the way managers view the business. Third, the organizational structure can indicate the
dimensions on which strategies should focus.
The choice of approach should depend on the size of the company, the degree of
diversification, the degree of geographical dispersion, the stability of the business
environment, and, finally,the managerial style currently embodied in the company's culture.
Brodwin and Bourgeois's research suggests that the Commander, Change, and Collaborative
Approaches can be effective for smaller companies and firms in stable industries. The
Cultural and Crescive alternatives are used by more complex corporations.

.
Resource Allocation
Resource allocation is a central management activity that allows for strategy execution.
In organizations that do not use a strategic-management approach to decision making,
resource allocation is often based on political or personal factors. Strategic management
enables resources to be allocated according to priorities established by annual
objectives.
Nothing could be more detrimental to strategic management and to organizational
success than for resources to be allocated in ways not consistent with priorities indicated
by approved annual objectives.
All organizations have at least four types of resources that can be used to achieve
desired objectives: financial resources, physical resources, human resources, and
technological resources. Allocating resources to particular divisions and departments does
not
mean that strategies will be successfully implemented. A number of factors commonly
prohibit effective resource allocation, including an overprotection of resources, too great
an emphasis on short-run financial criteria, organizational politics, vague strategy targets,
a reluctance to take risks, and a lack of sufficient knowledge.
Below the corporate level, there often exists an absence of systematic thinking about
resources allocated and strategies of the firm. Yavitz and Newman explain why:
Managers normally have many more tasks than they can do. Managers must
allocate time and resources among these tasks. Pressure builds up. Expenses are
too high. The CEO wants a good financial report for the third quarter. Strategy
formulation and implementation activities often get deferred. Todays problems
soak up available energies and resources. Scrambled accounts and budgets fail to

reveal the shift in allocation away from strategic needs to currently squeaking
wheels.3
The real value of any resource allocation program lies in the resulting accomplishment
of an organizations objectives. Effective resource allocation does not guarantee successful
strategy implementation because programs, personnel, controls, and commitment must
breathe life into the resources provided. Strategic management itself is sometimes referred
to as a resource allocation process.
Managing Conflict
Interdependency of objectives and competition for limited resources often leads to
conflict. Conflict can be defined as a disagreement between two or more parties on one or
more issues. Establishing annual objectives can lead to conflict because individuals have
different expectations and perceptions, schedules create pressure, personalities are
incompatible, and misunderstandings between line managers (such as production
supervisors)
and staff managers (such as human resource specialists) occur. For example, a collection
managers objective of reducing bad debts by 50 percent in a given year may conflict with
a divisional objective to increase sales by 20 percent.
Establishing objectives can lead to conflict because managers and strategists must
make trade-offs, such as whether to emphasize short-term profits or long-term growth,
profit margin or market share, market penetration or market development, growth or
stability, high risk or low risk, and social responsiveness or profit maximization. Trade-offs
are
necessary because no firm has sufficient resources pursue all strategies to would benefit
the firm. Table 7-5 reveals some important management trade-off decisions required in
strategy implementation.
Conflict is unavoidable in organizations, so it is important that conflict be managed and
resolved before dysfunctional consequences affect organizational performance. Conflict is
not always bad. An absence of conflict can signal indifference and apathy. Conflict can
serve to energize opposing groups into action and may help managers identify problems.
Various approaches for managing and resolving conflict can be classified into three
categories: avoidance, diffusion, and confrontation. Avoidance includes such actions as
ignoring the problem in hopes that the conflict will resolve itself or physically separating
the conflicting individuals (or groups). Diffusion can include playing down differences
between conflicting parties while accentuating similarities and common interests,
compromising so that there is neither a clear winner nor loser, resorting to majority rule,
appealing to a higher authority, or redesigning present positions. Confrontation is
exemplified by exchanging members of conflicting parties so that each can gain an
appreciation of the others point of view or holding a meeting at which conflicting parties
present their views and work through their differences.